Be prepared to handle situations, where law requires you to file your return even though no tax is payable in your case!

Section 139 of the Income-tax Act provides that an individual or a Hindu Undivided Family (HUF) is required to file his Income-tax Return, if his Gross Total Income (GTI) prior to various deductions under Section 80 family (such as 80C, 80D, 80G etc.) exceeds the basic income-tax exemption limit. From Assessment Year 2013-14, the prescribed exemption limit is Rs.2,00,000 (in case of both a male and female taxpayer), Rs.2,50,000 for resident Senior Citizens, aged 60 years and above but below 80 years and Rs.5,00,000 for resident Super Senior Citizens aged 80 years and above.

GTI includes within its scope the total of all taxable incomes, after considering the relevant deductions available under the five heads of income, but before allowing the eligible deductions under Section 80 family for purpose of computing the Total Income (TI). The case studies below will meaningfully illustrate this point.

Case Study – 1: Mr. J earned gross salary of Rs.4,00,000 in FY 2012-13. After excluding his exempt allowances and perquisites of Rs.70,000, his taxable salary works out to Rs.3,30,000. The interest payable on housing loan eligible for deduction under Section 24 is Rs.1,00,000 and his taxable income from other sources is Rs.30,000. His GTI thus works out to Rs.2,60,000 (3,30,000-1,00,000+30,000). Mr. J has invested Rs. 1,00,000 in investments eligible for deduction u/s 80C and also paid Mediclaim premium of Rs.10,000 entitled to deduction under Section 80D. His TI stands determined at Rs.1,50,000 (2,60,000-1,00,000-10,000) and therefore, the income-tax payable by him is Rs. Nil. However, in this case, Mr. J would be required to mandatorily file his tax return for Assessment Year 2013-14.

Case Study – 2: Taxable Pension and investment income of Mr. R, a Senior Citizen (aged around 70 years), is Rs.2,40,000. In this case, the GTI of Mr. R is Rs.2,40,000, which is below the basic exemption limit of Rs.2,50,000 in his case as a Senior Citizen. He is thus under no obligation either to pay any tax or even to file his tax return for Assessment Year 2013-14.

Case Study – 3: If in Case Study-2, if the GTI of Mr. R was Rs.3,35,000 and he had invested Rs.1,00,000 in Section 80C savings, his TI would work out to be Rs.2,35,000. Although no tax would be payable by him in this case, he would still be required to file his income-tax return for Assessment Year 2013-14, his GTI being higher than his exemption limit of Rs.2,50,000.

Case Study – 4: Mrs. P earns annual rental income of Rs.2,50,000. She is entitled to a standard deduction of Rs.75,000 (at 30% of the annual rental) and accordingly her GTI works out to Rs.1,75,000. This being lower than her personal exemption limit of Rs.2,00,000, she is not required to file her tax return for Assessment Year 2013-14.

The underlying logic of the aforesaid provisions is that the Income-tax Department would want your I.T. return to be under its tax scanner, if you are claiming a zero tax status on account of any deductions eligible under the family of Section 80. So even if you have no tax to pay, be ready to file your tax return in time, if your Gross Total Income exceeds your personal exemption limit!

MANDATORY RETURNS FOR FOREIGN ASSETS

Moreover, a resident Individual or HUF (other than not ordinarily resident in India) is required to mandatorily file his tax return even though he does not have any taxable income in India, if such taxpayer has any assets (including financial interest in any entity) located outside India or has signing authority in any account located outside India. This obligation is required to be discharged by filing the tax return via the e-filing mode.

It needs to be noted that the above provision shall not apply in cases of non-residents or residents but not ordinarily residents, within the meaning of Section 6 of the Income-tax Act. Accordingly, neither will they be required to declare any of their overseas assets in their Indian tax returns nor will they be mandatorily required to file their tax returns if they do not have any taxable income in India.